Recently I opened up a surprising can of worms with a blog post about CitizenRe wondering if they had finally solved the problem of making solar power compete with the electrical grid. At that post you will see a substantial comment thread, including contributions by executives of the firm, which I welcome. At first, I had known little about CitizenRe and the reputation it was building. I thought i should summarize some of the issues I have been considering and other elements I have learned.

CitizenRe’s offer is very appealing. They claim they will build a plant that can make vastly cheaper solar. Once they do, they will install it on your roof and “rent” it to you. You buy all the power it produces from them at a rate that beats your current grid power cost. Your risks are few — you put down a deposit of $500 to $1500 depending on system size, you must cover any damage to the panels, and they offer removal and replacement for a very modest fee if you need to reroof or even move. You lock in your rate, which is good if grid rates go up and bad if grid rates go down or other solar becomes cheaper, but on the whole it’s a balanced offer.

In fact, it seems too good to be true. It’s way, way cheaper than any offering available today. Because it sounds so good, many people are saying “show me.” I want to see just how they are going to pull that off. Many in the existing solar industry are saying that much louder. They are worried that if CitizenRe fails to deliver, all their customers will have been diverted to a pipedream while they suffer financial ruin. Of course, they are also worried that if CitizenRe does deliver, they will be competed out of business, so they do have a conflict of interest.

I’ve been writing about the economics of green energy and solar PV, and have been pointed to a very interesting company named CitizenRe. Their offering suggests a major cost reduction to make solar workable.

They’re selling PV solar in a new way. Once they go into operation, they install and own the PV panels on your roof, and you commit to buy their output at a rate below your current utility rate. Few apparent catches, though there are some risks if you need to move (though they try to make that easy and will move the system once for those who do a long term contract.) You are also responsible for damage, so you either take the risk of panel damage or insure against it. Typically they provide an underpowered system and insist you live where you can sell back excess to the utility, which makes sense.

But my main question is, how can they afford to do it? They claim to be making their own panels and electrical equipment. Perhaps they can do this at such a better price they can make this affordable. Of course they take the rebates and tax credits which makes a big difference. Even so, they seem to offer panels even in lower-insolation places like New England, and to beat the prices of cheaper utilities which only charge around 8 cents/kwh.

My math suggests that with typical numbers of 2 khw/peak watt/year, to deliver 8 cents/kwh for 25 years requires an installed cost of under $2/peak watt — even less in the less sunny places. Nobody is even remotely close to this in cost, so this must require considerable reduction from rebates and tax credits.

A few other gotchas — if you need to re-roof, you must pay about $500 to temporarily remove up to 5kw of panels. And there is the risk that energy will get cheaper, leaving you locked in at a higher rate since you commit to buy all the power from the panels. While many people fear the reverse — grid power going up in price, where this is a win — in fact I think that energy getting cheaper is actually a significant risk as more and more money goes into cleantech and innovation in solar and other forms of generation.

It’s interesting that they are offering a price to compete with your own local utility. That makes sense in a “charge what the market will bear” style, but it would make more sense to market only to customers buying expensive grid power in states with high insolation (ie. the southwest.)

Even with the risks this seems like a deal with real potential — if it’s real — and I’ll be giving it more thought. Of course, for many, the big deal is that not only do they pay a competitive price, they are much greener, and even provide back-up power during the daytime. I would be interested if any readers know more about this company and their economics.

Update: There is a really detailed comment thread on this post. However, I must warn CitizenRe affiliates that while they must disclose their financial connection, they must also not provide affiliate URLs. Posts with affiliate URLs will be deleted.
Some salient details: There is internal dissent. I and many others wonder why an offer this good sounding would want to stain itself by being an MLM-pyramid. Much stuff still undisclosed, some doubt on when installs will take place.